A nonrefundable tax credit is a type of tax incentive provided by the government that reduces the amount of tax owed by an individual or business.
A nonrefundable tax credit can only reduce the tax liability to zero. In other words, if the credit amount exceeds the tax owed, the excess cannot be refunded to the taxpayer.
Examples of nonrefundable tax credits include, Child Tax Credit, Lifetime Learning Credit, Foreign Tax Credit, Education Credits, Saver's Credit, Residential Energy Credits and more.
Both individuals and businesses who meet specific criteria and have incurred qualifying expenses can claim a non-refundable tax credit.
Non-refundable tax credits can help reduce the tax liability of eligible individuals or businesses by directly offsetting the amount owed, potentially resulting in a lower overall tax burden.